The fund is expected to launch in September. It will hold between 80 and 100 securities from a universe of about 270 CDS—Tamalpais is only interested in the most liquid U.S. CDS, and will not invest in either financials or utilities due to government involvement in those sectors.

To manage the new vehicle, Sausalito, Calif.-based Tamalpais lured Susan Kobayashi and Rob Elia from Mellon Capital Management, where they ran a similar long/short CDS strategy. Kobayashi, who led Mellon’s credit fund, has done stints at Marin Capital and Symphony Asset Management. Elia, a physics Ph.D who will build the fund’s models, formerly worked at Descartes Capital, Symphony Asset Management and UBS.

“The Merton model assumes that debt never increases,” Kobayashi told Hedge Funds Review. “Our model is based on the real world observation that high-yield companies aim to reduce debt while high-quality companies increase leverage over time. This is a fundamental difference in the way we view company behavior compared to other investors.”

The duo aim to return 12% to 15% over the risk-free rate of return.

Tamalpais Credit has a $1 million minimum investment requirement, and features monthly liquidity with 20 days’ notice. The Cayman Islands-domiciled fund employs Citigroup as its prime broker.

From the current issue of

The testimony of former FBI Director James Comey came and went with more hype than harm to Donald Trump’s administration. The more important issue is whether Congress spent too much political capital to get comprehensive tax reform done by the end of 2017. The likelihood of significant policy changes is fleeting for the year. Some economists are even losing hope that tax reform will be completed by the midterm elections of 2018.